Monday, February 14, 2005

Productivity in the illegal drug industry

The Economist points out how the price of cocaine has fallen in the developed world despite all of the government efforts to stem supply.
in the United States a gram of cocaine wholesaled for $38 in 2003, down from $48 in 2000 and from $100 in 1986, with no fall in purity. In Britain, cocaine is cheaper than ever: in 2003 it retailed for about £46 per gram ($75), down from £57 ten years ago
Spraying coca cultivations has reduced the area that is being planted with coca, but traffickers, thanks to progress in genetic engineering, are breeding more productive plants, and plants that can grow in the shade. Given the dramatic decline in nominal prices (not to mention the fact that there's been inflation), traffickers have also gotten better at getting the stuff across borders, something that I really can't fathom how they did.

Anyway, it's really amazing that, in the face of such stark evidence, the answer from governments always seems to be more of the same... where is the externality that leads to this choice?



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